- EUR/USD is currently trading at 1.1212, between a range of 1.1207 and 1.1215.
- Bearish pressure could ease on a recovery above 1.1245.
EUR/USD dropped from 1.1260 to just above 1.1200 overnight. US Retail Sales kept the Dollar lit. Following disappointing GDP data out of China at the start of the week, the U.S. data, consumer spending forged ahead solidly in June, retail sales posting a stronger than expected 0.4% increase.
“The control group grew at a 7.5% annualised pace, the strongest pace in 14 years, underscoring a very buoyant consumer as a key counterbalance to elevated global and international trade risk, substantially reducing the odds that the Fed is dragged into a larger easing cycle beyond a couple of insurance cuts,”
analysts at Westpac explained. Never the less, markets continued to price 31bp of easing at the 31st July meeting though Fed funds futures for 2020 rose about 3bp in implied yield.
Fed’s Powell
Federal Reserve Chairman Jerome Powell was delivering a speech on “Aspects of Monetary Policy in the Post-Crisis Era” at the “French G7 Presidency 2019 – Bretton Woods: 75 Years Later, Thinking About the Next 75” event in Paris, France.
Key quotes:
- In our baseline outlook, we expect growth in the United States to remain solid, labor markets to stay strong, and inflation to move back up and run near 2 percent.
- Uncertainties about this outlook have increased, however, particularly regarding trade developments and global growth.
- US growth appears to have moderated.
- Uncertainties are viewed around trade and global growth.
- In addition, issues such as the U.S. federal debt ceiling and Brexit remain unresolved.
- Fed saw core PCE running at 1.7% y/y in June.
- Baseline Fed outlook is for US growth to remain solid but uncertainties have increased.
- FOMC participants have also raised concerns about a more prolonged shortfall in inflation below our 2 percent target.
- Long-run factors contributing to lower interest rates, growth and inflation likely to persist.
- The manufacturing sector has been weak since the start of the year.
- Market-based measures of inflation compensation have shifted down, and some survey-based expectations measures are near the bottom of their historical ranges.
- Many FOMC participants judged at the time of our most recent meeting in June that the combination of these factors strengthens the case for a somewhat more accommodative stance of policy.
- We are carefully monitoring these developments and assessing their implications for the U.S economic outlook and inflation, and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.
- Growth in US consumer spending appears to have bounced back but business investment growth has slowed notably.
- We will also assess these developments in the context of the broader structural changes monetary policymakers have been facing since the Great Recession.
- I will focus on three tonight: the changed macroeconomic backdrop, the expanded toolkit, and the heightened focus on communication and transparency.
EUR/USD levels
Valeria Bednarik, Chief Analyst at FXStreet explained that “technical indicators have lost their bearish strength but hold around their daily lows, also near oversold levels. A break through the mentioned monthly low should open doors for a retest of the year bottom at 1.1106, while the bearish pressure could ease on a recovery above 1.1245, the mentioned Fibonacci resistance.”
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